Real Estate Doomers...Please talk me out of purchasing a home! (Scottsdale: sale, 2013)

[drcpa]

Originally Posted by Donna in AZ

Give them a lowball offer. $420,000. It's a buyer's market but you sound like you fell in love.
Tsk, tsk.

420K might be impossible...the homes been on the market for 200 days, and they recently dropped the price 70K such that its price per square foot is actually a few dollars lower than a couple recent sales...but we shall see!

[jimj]

If it were me I'd look for a house that's currently $300k (or less) that used to be $500-$600k and needs some cosmetic work and tlc.
The work/upgrades could be done with the $$$ you'd be saving on purchase and done at your pace and to your specs.
I'd also look to buy a house this big in the county instead of in the city to minimize the tax burden and increase the lot size giving you more options to add things and have more privacy, think guest or pool house, outdoor kitchen etc.
I've always tried to hold to the idea of buying outside the developed areas and wait for the development to grow out to me. If you choose the right area it's bound to happen and when it does your values will shoot up. Think of those that bought out on Scottsdale rd when it was a nothing town.

[Captain Bill]

If you're concerned about the future of the economy and the housing market, then perhaps you shouldn't buy.

It's you who has to make the ultimate decision; not your Realtor; not your tax advisor; not anonymous posters on a forum who have great intentions, but also have different perspectives and do not know what you need in terms of a home and life style.

Study what's going on in the national economy and the local economy.
Study the Phoenix Metro housing statistics, and the local statistics.

What's happening with supply and demand
What's happening with prices
Based on what's happening with supply and demand, what can you expect to happen to prices, and when.

If you want to buy a $500k house today at today's interest rate, can you study the available data and make an educated estimate of what the price of that house will be in two years, and what the interest rate will be in two years?

Will interest rates stay low for another two years
Will the economy improve
Will prices stay at this level for another two years.

We hit a bottom in prices in April 2009 and have only recently dipped slightly below that. The indications are that we may see lower prices during the next 4-6 weeks. However, the sales are strong, and there are a lot of buyers coming out of the woodwork at the present time, showing a stronger demand.

However, if you look at a market index that measures supply and demand, such as the Cromford Market Index, you'll see that the index has been improving since November 2007, meaning that demand has been increasing and supply has been decreasing.

In November 2007 the Cromford Market Index was at around 40 (100 is a balanced market-below is a sellers market-above is a buyers market) That index has increased steadily to 107 as of yesterday.

What eventually happens to price after the market index increases?

Prices lag the market index (supply vs demand) That was shown clearly in the period 2005-2007.

Your Realtor should be able to provide you with a lot of economic information about the Phoenix area and the east valley, plus a ton of market statistics that can help you make an educated decision.

[DowntownVentura]

Originally Posted by TheEconomist

You requested doom and gloom. Here it is for your oversized monstrosity (just kidding):

1) The 2K per month price tag is just the beginning. Maintenance will be a killer. It probably has two A/C's, both of which can break.
2) Air conditioning will be really expensive, especially in Arizona. What are you thinking???
3) You have to pay to have the lawn mowed in your big yard, that is when the Arizona heat doesn't destroy it and force you to pay absurd amounts on watering just to keep it alive.
4) The local governments are looking for money in this down economy and will try to fleece you on property taxes.
5) Your house probably will have very little in the way of landscaping. That's another 20K or backbreaking labor on your part.
6) The market can still collapse further and that 500K house you bought may only be worth 350K in a few years.
7) When the market rebounds, builders will go crazy and you will be competing with brand new houses that suddenly hit the market with the pent up fury of 3 years of no building

In all actuality though, if your job is secure then you will probably be fine with making this purchase. The only thing I would say is that 100K is a lot of money to put down at one time. Do you have at least another 50K available in case your situation falls apart? In this economy, you need cash reserves to prepare for the worst. So, if the 100K deposit puts your reserves into the 20 to 30K area, I would not do it.

There are counterarguments to your arguments and peoples opinion will differ. But I did want to comment on your number 7.

Why are builders not building? I am of the opinion they are not building because they cannot make a profit at the prices they would have to sell to compete in today's market. If that is in fact true, I can see builders ramping it up when the market rebounds but it will not be at today's prices. They will get back in when the prices are up to where they can make a profit.

There are so many statistics thrown around but the simple fact is in a lot of areas, the cost to build new has exceeded today's market prices. Building materials are starting to rise which further exacerbates this problem.

[sh9730]

Looking at today's release of the ARMLS (www.armls.com) statistics for December, as Capn Bill points out, prices are down again for the month over month and year over year...but sales NUMBERS are up almost 25% from November to December, and new listings are down as well. This is true in the Pinal County only statistics as well - pricing way down, and sales numbers for the month way up.

Not sure what it means....but that was a BIG jump in sales for one month...

[Captain Bill]

Originally Posted by sh9730

Looking at today's release of the ARMLS (www.armls.com) statistics for December, as Capn Bill points out, prices are down again for the month over month and year over year...but sales NUMBERS are up almost 25% from November to December, and new listings are down as well. This is true in the Pinal County only statistics as well - pricing way down, and sales numbers for the month way up.

Not sure what it means....but that was a BIG jump in sales for one month...

The Cromford Market Index has been trending up since Nov 2007. It went from a low of around 40 to yesterday at 107. (100 is a balanced market)

The prices will lag behind the supply/demand (which is what the CMI measures). We'll see some price decline for the next month or so, according to the Pending indicators. Then with the buying that's picking up, I expect to see some price leveling and slight increasing during the late spring.

A lot of buyers are coming out now. Usually I get one to two calls per month for buyers. This month I've had 8 so far, and they're all serious buyers; several are cash buyers.

I spoke with another broker who operates 3 offices and he is experiencing the same thing.

[sh9730]

Approximately half of the 850 homes sold in Pinal County in December were cash sales.

[drcpa]

Originally Posted by Captain Bill

If you're concerned about the future of the economy and the housing market, then perhaps you shouldn't buy.

It's you who has to make the ultimate decision; not your Realtor; not your tax advisor; not anonymous posters on a forum who have great intentions, but also have different perspectives and do not know what you need in terms of a home and life style.

Study what's going on in the national economy and the local economy.
Study the Phoenix Metro housing statistics, and the local statistics.

What's happening with supply and demand
What's happening with prices
Based on what's happening with supply and demand, what can you expect to happen to prices, and when.

If you want to buy a $500k house today at today's interest rate, can you study the available data and make an educated estimate of what the price of that house will be in two years, and what the interest rate will be in two years?

Will interest rates stay low for another two years
Will the economy improve
Will prices stay at this level for another two years.

We hit a bottom in prices in April 2009 and have only recently dipped slightly below that. The indications are that we may see lower prices during the next 4-6 weeks. However, the sales are strong, and there are a lot of buyers coming out of the woodwork at the present time, showing a stronger demand.

However, if you look at a market index that measures supply and demand, such as the Cromford Market Index, you'll see that the index has been improving since November 2007, meaning that demand has been increasing and supply has been decreasing.

In November 2007 the Cromford Market Index was at around 40 (100 is a balanced market-below is a sellers market-above is a buyers market) That index has increased steadily to 107 as of yesterday.

What eventually happens to price after the market index increases?

Prices lag the market index (supply vs demand) That was shown clearly in the period 2005-2007.

Your Realtor should be able to provide you with a lot of economic information about the Phoenix area and the east valley, plus a ton of market statistics that can help you make an educated decision.

Thanks, really appreciate your input. This is great advice.

[EdSpider]

I don't think the Scottsdale market can go much lower. If you look at sales and price trends it bottomed out in January 2011 and has been VERY VERY slowing inching up. Unit sales are up more than prices. I think if you can buy a property for about 35-40% of what it would have cost in 2008, you'll be ok.

What they say about location, location, location is still true. The best location's will appreciate better.

[BestintheWest]

Originally Posted by Captain Bill

If you're concerned about the future of the economy and the housing market, then perhaps you shouldn't buy.

That's the best advice I have seen. Whats the hurry?